Personal property is frequently used as collateral for a loan. One problem with loaning money based upon such collateral is the risk to the lender that the borrower may sell, destroy or move the collateral. In the event of default on the loan, the lender may then find that the collateral is not available for collection. This presents a risk to the lender.
Pawn lenders have addressed this problem by requiring that the borrower turn over the personal property into their possession until the loan is paid in full. This is inconvenient for both the lender and the borrower, however. First, this requires that the lender expend resources to track and store the collateral, such as at a warehouse. Second, while the collateral is in the possession of the lender, it is not available for use by the borrower. This may deter the borrower from pawning their collateral in the first instance.
New solutions are desired to these problems.